Peru president says he used offshore firm to legally avoid U.S. taxes: audio

LIMA (Reuters) - Peru’s embattled President Pedro Pablo Kuczynski told a congressional investigative committee that he used a company in the British Virgin Islands to legally avoid paying U.S. taxes, according to audio heard by Reuters on Sunday.

Peru's President Pedro Pablo Kuczynski participates in an event to present a balance of Peru's exports during 2017 in Lima, Peru March 13, 2018. REUTERS/Mariana Bazo

Kuczynski made the disclosure during more than seven hours of questioning on Friday as he tried to disentangle himself from a growing corruption scandal less than a week before a new impeachment vote in Congress.

A former Wall Street banker who is married to an American, Kuczynski told the committee that the offshore company, Dorado Asset Management Ltd, was controlled by his daughter and helped him sidestep U.S. taxes on his properties in Peru.

“Why would we pay Uncle Sam and Mr. Trump a bunch of money that’s here in Peru?” Kuczynski is heard telling the committee in a four-minute segment of the audio recording from the closed session.

Kuczynski will meet with U.S. President Donald Trump, who himself has called tax avoidance “smart,” at a gathering of the region’s leaders in Lima next month.

In response to the recording, one of Kuczynski’s attorneys who was present during the session, Gonzalo del Rio, told Reuters the transaction was legal and praised Kuczynski for being willing to discuss his personal finances with the committee despite the heated political climate.

Karina Beteta, the opposition congresswoman who asked Kuczynski about Dorado, confirmed the contents of the recording were accurate.

Despite being legal, tax avoidance schemes have faced a wave of criticism since the 2016 publication of the Panama Papers, an investigation into the shadowy world of offshore holdings and hidden wealth by the International Consortium of Investigative Journalists.

Kuczynski held U.S. citizenship before renouncing it to run for president in 2016, when he was elected on hopes he would use his private sector experience to clean up government corruption.

But less than two years into his term, Kuczynski’s wealth and financial history has come under increasing scrutiny as opposition lawmakers accuse him of colluding with Odebrecht [ODBES.UL], a Brazilian construction company under investigation for bribery.

‘DIE POOR’

A report by Peru’s banking superintendent this week found Kuczynski registered the sale of his house in Lima to Dorado for $695,000 in 2006, before the company relocated to Peru under Kuczynski’s control nearly a decade later.

When asked about the property sale, Kuczynski told the committee “it’s very simple. In the United States there’s a big tax if you give up your citizenship, and the less property you have, the less you have to pay,” Kuczynski said. “So I have to offload my property or I die poor.”

Opposition lawmakers in the committee said Kuczynski’s use of the offshore company only raised new questions about his moral fitness for holding public office.

“I’m more convinced than ever that the impeachment motion must succeed,” Beteta said in an interview.

Beteta added that Kuczynski was unable to provide evidence that he relinquished management of his consulting firm, Westfield Capital Ltd, before it signed business deals with Odebrecht while Kuczynski was a finance minister in the early 2000s.

The banking superintendent report said Westfield agreed to provide financial advising services on three Odebrecht projects within a year of Kuczynski becoming finance minister in 2004.

Del Rio said Kuczynski relinquished management of Westfield via a verbal agreement with a business associate and never worked as a financial adviser while holding public office.

Until December, Kuczynski had denied having professional links to Odebrecht and has since said there was nothing improper or illegal about them.

“The president’s professional and public career has always been carried out transparently, within the banking system and paying corresponding taxes,” Kuczynski’s office said in a statement on Friday.

Congress will vote on whether to force Kuczynski from office on Thursday. A similar impeachment motion failed passage by eight votes in December.

If Kuczynski is impeached in a vote on Thursday, Vice President Martin Vizcarra would replace him as president.